Series 63 Units 4 & 5 (3)
What is the statute of limitations for violations of civil provisions of the USA?
3 years from the date of sale, 2 years after discovering the violation
Aaron has been suspicious of possible churning of his account but has taken no action because account performance has been outstanding. After reviewing his most recent statement, Aaron suspects that excessive transactions have occurred. He consults his attorney, who informs him that under the USA, any lawsuit for recovery of damages under the Act must commence within?
3 years of occurrence or 2 years of discovery, whichever occurs first
Whats the statute of limitations for criminal offenses under the USA?
5 years from the date of the offense.
Which of the following is included in the USA definition of a security?
A US Treasury bond
An agent of a BD solicits clients to purchase unregistered promissory notes. The agent claims that promissory notes are not securities and, therefore, do not need to be registered. The Administrator disagrees with that position and would issue?
A cease and desist order against the agent
A primary transaction is?
A new offering of an issuer sold to investors
Which of the following does the USA consider an offer and sale?
A purported gift of assessable stock
Which of the following securities is not exempt from the registration and advertising requirements of the USA?
A variable annuity contract issued by Protection Plus Life Insurance Co
Which of the following accurately describes a cease and desist order as authorized by the USA?
An Administrator's order to refrain from a practice of business she believes to be unfair
What's an institutional investor?
An investor that manages large amounts of money, such as a mutual fund, an insurance company, a bank, or a pension fund
State F is proposing to issue a $100 million bond issue. The USA would define State F as?
An issuer
Primary offering?
An issuer transaction involving new securities
An agent recommends the purchase of ABC warrants. Each warrant enables the holder to exercise and receive one share of ABC common stock at a price of $45 per share. The Uniform Securities Act would view this as?
An offer of the ABC warrant and an offer of the ABC common stock
The Administrator may cancel the registration of an adviser if?
Any of the above
When does registration by coordination become effective?
At the same time the federal registration becomes effective
All of the following meet the definition of an exempt transaction except?
Bob Babbitt, an employee of Amalgamated National Bank of Detroit, buys securities from Bass Securities, a registered BD
Jane is an agent registered in States A and B. While sitting in her office in State A, she contacts a client who lives in State B with a recommendation to buy ABC stock. The client agrees to make the purchase. Jurisdiction here would belong to?
Both the State A and State B Administrators
Jane has a State A - based client, Sally, who spends the winters in State C, a state where neither Jane nor her BD have a place of business or any retail clients. Jane sends Sally a research report with a strong buy recommendation for XYZ stock. Sally calls Jane with an order to purchase 100 shares of XYZ. Jurisdiction over this transaction belongs to?
Both the State A and State C Administrator
Included in the USA definitions of a security would be?
CP
What is the number of limited offering transactions allowed for an exempt transaction?
Called a private placement, directed at not more than 10 persons (called offerees) other than institutional investors during the previous 12 consecutive months provided no commissions are paid or no general solicitation is used.
When making an offer of a new issue that is in registration to a prospective client, an agent claims that his registration with the Administrator is proof of his qualifications. Under the USA?
Claiming his registration is approved by the Administrator subjects this agent to civil liability only if a sale results
XYZ Corporation has been in business for over 20 years. It needs additional capital for expansion and determines that a public offing in its home state and neighboring states is appropriate. Which method of securities registration most likely would be used to register this initial public offering?
Coordination
What is the maximum criminal penalty the court can issue for fraud?
Fine of $5k, a jail sentence of 3 years, or both
Which of the following statements relating to penalties under the USA is true?
If a violation has occurred in the sale of a security, the purchaser of the security may recover the original purchase price, legal cots, and interest, less any earning already received
A radio or tv program is considered to originate where?
In the state where the microphone or tv camera is located, not the transmitter
What is the criteria for an accredited investor?
Individual with net worth greater than $1million (individually or with spouse), pr earnings greater than $200k per year ($300k with spouse) in each of the previous 2 years
Registration by Qualification is known as what type of offering?
Intrastate offering
Palterer Products, Inc (PPI), headquartered in State J, has sent an announcement to a number of BD's in the state promoting their 8% promissory notes as a high interest non-security alternative to a bank CD. The compliance officer of your firm forwards this to the State J Administrator. What action would the Administrator likely take?
Issue a stop order against PPI after giving opportunity for a hearing
An administrator would be in compliance with the USA when using all of the following storage methods Except?
Microscopic
Nonexempt securities?
Need not be registered if sold in an exempt transaction
Nonissuer Transaction?
One in which the proceeds of the sale do not go, either directly or indirectly, to the entity that originally offered the securities to the public, IE NYSE or Nasdaq
How long is registration effective for on filing by registration by coordination or notice filling or qualification?
One year from its effective date.
Registration statements for securities under the USA are effective for?
One year from the effective date
As defined in the Uniform Securities Act, each of the following would be considered an exempt transaction except?
Preorganization certificates are subscribed to by 9 investors in the state earning the agent a modest commission
Under the USA, if a security is registered by qualification, the Administrator may require an agent to present the prospectus for a new issue to the offeree?
Prior to making the sale
The applicant is enjoined temporarily from engaging in the securities business
Prior written acknowledgement of the applicant
Registration is effective when ordered by the Administrator in the case of registration by?
Qualification
What will not be found in the registration statement?
Rating of the security
Registration by Notice Filing is known as what?
Registered investment company
Registration by Coordination files with?
SEC plus state registration
Which of the following would not be included in the definition of federal covered security?
Stock issued by a life insurance company authorized to do business in the state
Wayne and Grayson, LTD., is a BD with offices in Gothem, New Jersey. They place an ad for a new securities issue in the Gothem Gazette. Approximately 55% of the Gazette's readership is in Delaware. Under the USA, jurisdiction over this ad would lie with?
The Administrator of New Jersey
If it is in the public interest, the USA provides that the state Administrator may deny the registration of a BD for all of the following reasons Except?
The applicant is not qualified because of lack of experience
A non-profit organization wishes to issue a debt security to provide funds for expansion of the organization's activities. Under the USA, if the Administrator questions the security's eligibility for an exemption from registration, the obligation to prove the exemption is justified is on?
The person requesting the exemption
An Agent of a BD has been found civilly liable for make untrue statements in connection with a public offering. The officers of the firm purchased a compliance program from a third party software developer that was designed to be able to protect against the untrue statements reaching clients. Unfortunately, the program was never used because they could not figure out how it worked. What is the nature of the civil liability of the officers?
They are liable because they did not act responsibly
Under the USA, all of the following are exempt securities except?
Unsolicited transactions
If someone is convicted of a misdemeanor in one state and them moves to a state where that same crime is a felony. If the person were to then apply for registration, the Administrator would do what?
Use the information of where the crime occurred, can't change it to a felony because it didn't happen in that state.
Which of the following securities is not exempt from the registration provisions of the USA?
Variable life insurance policies sold by a life insurance company authorized to do business in the state
How long does someone have to respond to a letter of rescission?
Within 30 days
If an agent chooses to appeal an Administrator's order, when must the agent file for review of the order with the appropriate court?
Within 60 days after the entry of the order
How long does a person have to appeal an order of the Administrator?
Within 60 days of order issuance
How long does someone have to appeal an appropriate court?
Written petition within 60 days
Is it possible for a registration statement to be amended after its effective date to change the number of shares to be offered and sold?
Yes, as long as the public offering price and underwriter's discounts and commissions are unchanged.
Can someone besides the issuer file a registration statement?
Yes, by any other person IE such as a stockholder making a large block sale or by a BD
Can a registration by coordination or qualification be placed in ESCROW?
Yes, if: Issued within the past 3 years Issued to a promoter at a price substantially different than the offering price Issued to any person for a consideration other than cash
Does the statue of limitations cease or continue if someone dies?
continues
True or False: Bona fide pledge or loan is considered an offer and sale?
false
True or False: act incidental to a judicially approved reorganization with which a security is issued in exchange for 1 or more outstanding securities is considered an offer and sale?
false
True or False: class vote by stockholders, pursuant to the certificate of incorporation or the applicable corporation statute, or a merger, consolidation, reclassification of securities, or sale of corporate assets in consideration of the issue of securities of another corporation is considered an offer and sale?
false
True or False: gift on non-assessable stocks are considered an offer and sale?
false
True or False: stock dividend, if nothing of value is given by stockholders for the dividend is considered an offer and sale?
false
Can registration reports be sent to customers more frequently then quarterly?
no
Do cease and desist orders require a hearing?
no
Is a confirmation of a securities trade a security?
no
With regard to the registration requirements of the USA, which of the following statements are true?
o An application for registration must indicate the amount of securities to be issued in the state o The administrator may require registrants to file quarterly reports
What is NOT considered a security?
o An insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically o Interest in retirement plan, such as an IRA or 401(k) plan o Collectibles o Commodities such as precious metals and grains or futures contacts for commodities o Condominiums used as personal residences o Currency
What is needed to file for Registration by Coordination?
o Consent to service of process o Copies of the latest form of prospectus filed under the Securities act of 1933 o Copy of articles of Incorporation and bylaws o Copy of the underwriting agreement o Copies of any other information filed by the issuer under the Securities Act of 1933 o Each amendment to the federal prospectus promptly after it is filed with the SEC
What is needed to file for Notice Filing with the State Administrator?
o Documents filed along with their registration statements filed with the SEC o Documents filed as amendments to the initial federal registration statement o A report on the value of such securities offered in the state o Consent to service of process
Although the Administrator has great power, the USA does place some limitations on the office. Which of the following statements regarding those powers are true?
o In conducting an investigation, an Administrator can compel the testimony of witnesses o An Administrator may summarily deny the registration of a securities professional who has been convicted of a felony within the past 10 years but must provide, if requested in writing, a hearing with 15 days
What are the different types of exempt transactions?
o Isolated nonissuer transactions o Unsolicited brokerage transactions o Underwriter transactions o Bankruptcy, guardian, or conservator transactions o Institutional investor transactions o Limited offering transactions o Preorganization certificates o Transactions with existing security holders o Nonissuer transactions by pledgees
It is unlawful for any person to offer or sell any security in this state unless?
o It is registered under the act o The security or transaction is exempted from registration under the act o Or it is a federal covered security
It is unlawful for any person to offer and sell any security in a state unless?
o It is registered under the act o The security or transaction is exempted under the act o It is a federal covered security
A state's security Administrator has jurisdiction over a securities offering if?
o It originated in that state o It was accepted in that state
To protect the public, the Administrator may?
o Limit a registrant's functions to those of a BD if, in the initial application for registration as an investment adviser, the registrant is not qualified to act as an adviser o Consider approving a registration that the registrant will work under the supervision of a registered investment adviser or BD
What are the 4 broad powers the Administrator has to enforce and administer the act in his state are?
o Make, amend, or rescind rules and orders and require the use of specific form o Conduct investigations and issue subpoenas o Issue cease and desist orders and seek injunctions o Deny, suspend, cancel, or revoke registrations and licenses
What's required for registration by Qualification?
o Names, address, and form of organization o Information on directors, officers, and every owner of 10% or more of the issuer's securities, and the remuneration paid to owner's in the last 12 months o Description of the issuer's capitalization and long-term debt o Estimated proceeds and the use to which the proceeds will be put o Type and amount of securities offered, offering price, and selling and underwriting costs o Stock options to be created in connection with the offering o Copy of any prospectus, pamphlet, circular, or sales literature to be used in the offering o Specimen copy of the security, along with opinion of counsel as to the legality of the security being offered o Audited balance sheet current within 4 months of the offering, with an income statement for 3 years before the balance sheet date
What IS considered a security?
o Note o Stock o Treasury stock o Bond o Debenture o Evidence of indebtedness such as a promissory note o Certificate of interest or participation in a profit-sharing agreement o Collateral trust certificate o Preorganization certificate or subscription o Transferable share o Investment contract o Voting trust certificate o Certificate of deposit for a security (ADRs, not a bank CD) o Certificate of interest or participation in an oil, gas, or mining title or lease, or in payments out of production under such a title or lease o Puts, calls, straddles, options, or privileges on a security o Any interest or instrument commonly known as a security o Certificate of interest or participation in, receipts of, guarantees of, or warrants or rights to subscribe to or purchase any of the above
When does the Administrator have jurisdiction?
o Offer originated in the Administrator's state o Offer was directed to the Administrator's state o Offer is accepted in the Administrator's state
Martha is an agent with Rapid Execution Services (RES), a BD registered in all 50 states. Martha offers an IPO of a non-exempt security to a client without realizing that the security has not been registered in the client's state. The client purchases 500 shares of the new issue and, six months later, sells the stock at price 70% below the original purchase price. Because the stock was not registered in the client's state, the client could claim?
o Payment of the difference between the proceeds and the purchase price o Interest at the state's legal rate, minus any income received from the security o Court costs and lawyer's fees if the client has to go to court
The Administrator maintains a record of all applications for?
o Registration of securities and registration statements and all applications for BD, agent, IA, or IAR registration which are or have ever been effective in his state o All written notices of claim of exemption from registration requirements o All orders entered under this act
In conducting an investigation, the Administrator, or any officer designated by him, has the power to?
o Require statements in writing, under oath, regarding all matters relating to the issue under investigation o Publish and make public the facts and circumstances concerning the issue to be investigated o Subpoena witnesses and compel their attendance and testimony o Take evidence and require the production of books, papers, correspondence, and any other documents deemed relevant
With regard to the powers of the Administrator, which of the following statements are NOT true?
o The Administrator must seek an injunction to issue a cease and desist order o The USA requires an Administrator to conduct a full hearing, public or private, before issuing a cease and desist order o The USA grants the Administrator the power to issue injunctions to force compliance with the provisions of the act
Under the USA, which of the following would be considered an exempt transaction?
o The call from an existing client to purchase 1,000 shares of a nonexempt common stock that does not have an effective registration in this state o The sale of shares of a bank's IPO to an institutional client
In the case of securities purchased as a result of improper investment advice, the buyer may recover?
o The cost of the advice o Plus losses resulting from the advice o Plus all interest costs from the date of fee payment at a rate determined by the Administrator o Plus any reasonable attorney's fees o Less the amount of any income received from such advice
What are the different types of exempt securities?
o US and Canadian government and municipal securities o Foreign government securities o Depository institutions o Insurance company securities o Public utility securities o Federal covered securities o Securities issued by nonprofit organizations o Securities issued by cooperatives o Securities of employee benefit plans o Certain money market instruments
True or False: a purported gift of assessable stock is considered to involve an offer and a sale?
true
True or False: a sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which give the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security?
true
True or False: any security given or delivered with, or as a bonus on account of, a purchase of securities or anything else is considered to constitute part of the subject of the purchase and to have been offered and sold for value?
true
True or False: the person attempting to make the sale is known as the offeror and the security is being offered to the offeree?
true
An Administrator has jurisdiction over an offer to sell securities if it was made in a newspaper published within the state with no more than?
two-thirds of its circulation outside the state
Do stop orders require a hearing?
yes
Would they need register as a BD in this scenario, if a car dealer, as an essential part of a sale, offers 1,000 in corporate bonds as an incentive, this would be considered a bonus under the act?
yes
